During 2016, the UK Government ran a review process for setting a new Charter for the BBC. An independent review to look at how the BBC is governed and regulated was commissioned by the Government and, in March 2016, concluded that regulation of the BBC should pass to Ofcom. The Government confirmed its decision that Ofcom should regulate the BBC in a White paper published in May 2016.

　A new BBC Royal Charter for the period 2017-2027 was published by the Government on 15 December 2016, together with an accompanying Agreement between the BBC and the Secretary of State for Culture, Media and Sport. The Charter and the Agreement together set out how the BBC will operate in the new Charter period.

　Following the publication of the Charter and Agreement, Ofcom consulted on our new responsibilities in relation to upholding Content Standards in BBC programming, how we hold the BBC to account for the delivery of its mission and public purposes and ensuring that the BBC doesn’t harm fair and effective competition in the areas in which it operates.

　In granting a new Royal Charter and renewing the constitutional arrangement of the BBC until 2027, the Government confirmed the BBC’s place at the heart of the UK’s successful broadcast ecology and creative economy, as well as its valuable contribution to many people’s lives. However, in resetting the BBC’s Mission and Public Purposes, the Government made clear that it expected the BBC to do much more in certain key areas, to justify its unique funding and privileged status.

　This new Charter and Agreement represented the biggest reform of the governance and regulation arrangements of the BBC since it was founded. In handing responsibility for regulation for the first time to an external body the Government signalled its intention for the BBC to be more robustly held to account for its standards, potential impact on the market, overall performance and independence. Trusting Ofcom with this new function was also recognition of the regulator’s successful track record, scale, credibility and existing role in certain key areas of Public Service Broadcasting (PSB) delivery – as well as the value of its overview of the whole broadcast and communications sector at a time of increasing convergence and interconnectedness.

　The Government granted Ofcom significant powers to discharge its new duties, but it was vital for Ofcom to set out – and for others to be understand – the clear distinction between governance and regulation.

　Ofcom would not be a ‘Shadow Board’. Under the new Charter, the BBC Board and Ofcom have distinct roles. It is for the BBC Board to ensure the BBC acts in the public interest and meets its wider Charter obligations, as well as oversee strategy, service delivery, efficiency and performance measurement in the first interest. Ofcom’s role is to act where the BBC isn’t delivering for its audiences and ensure it acts reasonably in relation to others in the sector. To carry out this role, Ofcom was given robust enforcement powers to hold the BBC to account where it failed to comply.

　This was a clean break with the old regime. Previously, the BBC Trust was responsible for both governance and regulation, Ofcom’s new role is very different and its regulatory frameworks are genuinely new, reflecting its position as external regulator and experience of regulating the entire broadcasting sector.

　For Ofcom to be effective it was important that it had the flexibility to bring its expert judgement to bear on what are complex new requirements. Ofcom is scrupulously independent of Government and the organisations it regulates, and of equal importance is the independence of the BBC itself. The BBC must have the space to take creative risks and choose how it organises itself – provided it continues to comply with its overarching duties – without the regulator involved in the minutia of its creative decision-making, scheduling decisions or management structures.

<Priorities in the new Charter>

　In the new Charter, for the first time, the BBC was given hard wired duties to ensure its services and outputs are distinctive, that they reflected, represented and served all the diverse communities of the UK and that the specific needs of people in the Nations and Regions were met. These newly crafted commitments reflected the views of audiences and stakeholders gathered during the extensive public inquiries that fed into the White paper and subsequent Charter and Agreement. Ofcom agreed with the emphasis on these three issues and made them focus of its early work in fulfilment of its new responsibility for overseeing the BBC’s performance.

Distinctiveness

　’Distinctiveness’ was put at the heart of the new Charter and Agreement, embodied in the BBC’s new Mission and Public Purposes. Ofcom made clear it would use its new powers to regulate with this in mind, to ensure the BBC delivers high-quality, distinctive output for all its audiences. This requires complex and nuanced judgement to allow the BBC to take creative risks. The BBC must feel incentivised to deliver distinctive output for all audiences. Ofcom’s role would be to monitor closely what the BBC is providing and the impact that this is having on viewers and listeners. In some instances, specific quotas will also be appropriate, but we will need to consider the case for these very carefully. It is clearly an ongoing challenge to creating meaningful targets for distinctiveness.

Diversity

　The Charter and Agreement compelled the BBC to assess and meet the needs of the diverse communities of the UK, to pay regard to underrepresented communities and in so doing, provide a duly accurate and authentic portrayal of life in the UK today. In addition, it must promote equal opportunities for its employees.

　Ofcom said it would hold the BBC to account for how it meets these obligations and would measure and scrutinise what the BBC is doing, report periodically on its delivery across its core purposes, and set specific requirements on the BBC’s output in our operating licence. In addition, we announced that our first ‘ad hoc’ review of BBC performance would be a wide ranging, multi-input qualitative and quantitative review of representation and portrayal on BBC television.

Nations and Regions

　Providing output and services that meet the needs of the United Kingdom’s Nations and Regions as well as contributing to their development by investing in the creative economies of each of the nations is now a core Public Purpose of the BBC.

　Ofcom’s duties here were clear; we must create the conditions that ensure the BBC makes sure audiences in Scotland, Wales, Northern Ireland and England are well served. These include setting requirements on the range, quality, and broadcast times of output of national or regional interests as well as determine the proportion of programme production in the nations and regions.

　Ofcom’s agreed that its overall approach to taking on full responsibility for regulating the BBC would:

• Recognise that the BBC is the cornerstone of broadcasting– the BBC has a special status, but we don’t believe that it should receive special treatment
• Firmly place initial responsibility with the new BBC Board – It is for the BBC Board, not Ofcom, to determine which strategy will optimally deliver the mission and purposes defined in the Charter, to hear and judge Editorial complaints and to carry out a ‘public interest test’ on changes to UK public services. This will incentivise the right behaviours at the BBC, separating regulation and governance
• Make good use of our depth of knowledge and experience– We have a depth of experience in regulating the BBC, the other PSBs, and the wider broadcasting sector. And we already have a role in regulating the BBC in the key areas of editorial standards, competition and performance.
• Ensure stakeholders are consulted ensuring the views of citizens, consumers and stakeholders feed into our thinking
• Provide clarity about our expectations of the BBC – and how we will address issues if things go wrong.

<Ofcom’s Operating Framework for the regulation of the BBC>

　The Charter and Agreement required Ofcom to issue an Operating Framework setting out how it would regulate the BBC. We committed to developing a clear, efficient and easy to understand accountability framework that left no room for doubt about the contribution of all the BBC’s outputs and services to the fulfilment of its new Mission and Purposes.

　Ofcom’s role would cover three main areas; editorial standards, competition and performance. The Operating Framework we designed set out the regulatory tools that Ofcom would use to hold the BBC to account. Ofcom consulted separately on the detail of its role in these areas published a final version of this Operating Framework in March 2017. In summary our regulatory processes will cover the following areas:

Editorial Standards

　Ofcom set & published a “broadcaster first” based complaints regime where, the BBC will handle all editorial complaints, with complainants able to complain to Ofcom where they are unsatisfied with its response or the BBC fails to respond in a timely manner. Ofcom can consider complaints about all BBC content, including accuracy and impartiality. Ofcom outlined sanctions procedures for general and editorial output; and set out Fairness & Privacy and online material complaints procedures; set & enforce rules for Party Political Broadcasts and Access Services and can undertake research and thematic reviews into editorial standards issues.

Competition

　Ofcom is required to protect fair and effective competition in the areas in which the BBC operates using a variety of tools including: assessments of whether changes to a range of BBC activities, including new services, constitute material change Broadcast Competition Assessments (BCA); Broadcast Competition Reviews (BCR); Commercial Separation assessments; Trading Procedures; a Cross Promotion Framework; Commissioning assessment; and framework addressing the distribution of BBC public services. Plus, a Competition Complaints process to hold the BBC to account. The Charter makes clear a ‘BBC First’ approach to complaints resolution.

Performance

　Having duties in relation to the BBC’s performance was a new and high priority area of responsibility for Ofcom. We were tasked with holding the BBC to account in relation to its output and services, and set out how audiences were firmly at the heart of our approach, as well the range of tools we would use, including:

• the ability to set enforceable regulatory conditions on the BBC’s UK Public Services through a new Operating Licence. The BBC would face sanctions, including – for the first time – the possibility of financial penalties, if it failed to meet these regulatory conditions.
• in addition to assessing compliance with these regulatory conditions, we said we would examine the BBC’s wider performance through a new performance measurement framework.
• a requirement that we report annually on these performance measures and the BBC’s compliance with the regulatory conditions.
• a requirement that we conduct at least two in-depth reviews of the BBC’s performance. We can also conduct ad hoc reviews, where we feel appropriate.

　The licence set out the enforceable regulatory conditions that we considered appropriate to ensure the BBC fulfils its duties, it does not set BBC programme or service strategies or budgets. These areas are not part of Ofcom’s functions. The BBC Board is responsible for ensuring that the BBC fulfils its Mission and promotes the Public Purposes and sets the strategic direction and the creative remit for doing so. The BBC must publish an annual plan for each financial year, in advance of the period to which it relates, which must include (amongst other things) the creative remit for that year; the work plan for that year; and provision for the United Kingdom’s nations and regions.

　We consulted from March to July 2017 on:

a)a draft BBC operating licence, and the process for setting and amending this in future; and

b)Ofcom’s proposed performance measures for the BBC, and the process for setting and amending these in future.

　We proposed setting a single Licence for all the BBC’s UK public services because it is more accessible and coherent, as the different requirements we are setting will variously be aimed at one, some or all BBC services. This approach also allows us to adapt the Licence in the future. We supplemented it by producing individual documents for each nation of the UK, drawing together all the regulatory conditions applying to the BBC in that nation in a single place.

　We proposed that our Licence should be organised around the BBC’s public purposes. For each public purpose we set out objectives for the BBC, together with a range of specific regulatory conditions – measurable requirements that we will assess objectively and enforce if the BBC falls short. The final Licence maintains this approach, but we made changes to improve and strengthen the regulatory conditions in response to consultation responses, our own research and the BBC’s interim annual plan.

　In October 2017 we issued a statement setting out the final licence and our performance framework, together with the processes for setting and amending these in the future. It included detailed Annexes setting out how we have taken account of consultation responses and of the BBC’s interim annual plan published on 3 July 2017.

　The Licence set out a wide range of regulatory conditions that the BBC must meet. Our new regulatory conditions raised the bar for the BBC. In most areas, they placed tougher requirements on the broadcaster than existed before, as well as safeguarding key areas of delivery. They set a baseline for future performance. In summary, the Licence:

• Strengthened news and current affairs rules.
　To make sure the BBC reaches the widest audiences possible with its news and current affairs content, we increased quotas for news on BBC One and current affairs on BBC One and BBC Two, and set new regulatory conditions


• Increased requirements around programmes for children


• Set measures to secure a more distinctive BBC across all its services.
　At least three-quarters of all programme hours on the BBC’s most popular television channels must be original productions, commissioned by the BBC for UK audiences. Radio 1 and Radio 2 must play a broader range of music than comparable commercial stations and must feature more music from new and emerging UK artists.


• Supported social action campaigns on BBC radio


• Safeguarded vulnerable genres such as arts, music and religious programmes.


• Supported a wide range of valued genres.


• Supported regional and national audiences, and creative economies across the UK.


• Required the BBC to reflect the full diversity of the UK population.

　The new operating licence came into force in January 2018 and in October 2018, we published our first Annual Report on the BBC, covering April 2017 to March 2018.

　Our main conclusions were that although the media landscape is changing rapidly, the BBC continued to play a central role across TV, radio and online platforms. Its overall reach remained high, with more than nine in ten adults consuming BBC content each week. On average, we estimated that audiences spent around 2 hours 45 minutes with the BBC every day. It also continued to attract big audiences through TV programmes such as drama on BBC1, and radio programmes such as the breakfast show on BBC Radio2.

　We said the BBC was generally delivering on its remit for audiences through the breadth and quality of its output. It provided a significant volume of news and current affairs, a wide range of learning and educational content, as well as high-quality distinctive and creative content for all audiences across its mainstream and specialist services. Audience satisfaction continued to be high: three-quarters of people said they are satisfied with BBC radio and with BBC online, and two-thirds with BBC TV.

　We highlighted four key areas where it needs to go further:

• Embed transparency into its working practices.
　We said the BBC was not sufficiently transparent, particularly in the area of competition, and that it did not routinely explain planned changes in its public service activities in enough detail to potentially affected parties, which it needs to do to assess the potential impact of its activities on competition. The BBC Board should drive improvements here. The BBC’s governance arrangements need to ensure separation between the BBC’s public service and its commercial activities. We noted that the BBC has indicated its intention to enhance transparency in this area.


• Maintain its commitment to original UK programmes.
　The BBC distinguishes itself through original programmes that reflect UK lives and experiences. We said it should maintain its focus here and be more innovative and take more risks in doing so.


• Take significant further steps to engage young people.
　As the BBC recognises, it is not currently doing enough, quickly enough, to reach young people, who are critical to its future success. We said it needs to take significant steps to address this issue, to ensure it delivers content that appeals in ways that suit and reflect young people’s viewing and listening habits.


• Continue to improve how it represents and portrays the whole of UK society.
　Our Review of representation and portrayal on BBC television found that the BBC (and TV in general) is better at representing and portraying a wider mix of people than it used to be. But it should go further to represent and portray different audiences authentically.

　We wrote to the BBC with these findings and expect to continue to discuss progress against the areas outlined throughout 2019.

　Our next annual report will include the first full set of annual data, including calendar and financial year results against all the conditions and requirements in the new Licence, including new reporting requirements around on and off-screen diversity – as well as audience satisfaction with it.

　Regulating the BBC doesn’t happen in a vacuum, and early in the year, Ofcom laid out our early thinking on the general challenges facing UK broadcasting, and the PSBs. We noted the importance of PSBs in anchoring our sense of ourselves and our society, reflecting a rapidly changing world back at us – and to the rest of the world. And of PSB’s role in nurturing new talent, investing in research, anchoring the creative economy.

　This collective strength of PSB is continually reflected in Ofcom’s consumer research; audiences ascribe high value to the quality of output, the range of genres on offer, the trusted news.

　But there are challenges facing the system that has endured for so long. These can be summarised in two ways:

Fragmentation
　every day, hundreds of television channels compete for our attention with tablets, smartphones, watches and games consoles. We have never had so much choice as we do now. When we used to talk about screen time, we usually meant TV screens, but in a remarkable short time the TV screen is only one of many, multiple screens competing for our attention.

• This choice is fantastic for audiences, but fragmentation of viewing across different platforms creates disintermediation and raises the question of the availability of PSB content and whether it can be easily found
• The innovation and choice offered by the likes of Netflix and Amazon Prime Video and others mean certain groups are spending less time with traditional television channels

Globalisation
　Content is now a worldwide market with global players.

• The strength of global players like Netflix, and the entry of other global platforms like Facebook as commissioners of original content, has kick-started a wave of consolidation.
• We have seen this in Disney’s bid for Fox, and Comcast’s bid for Sky. The question is how to compete financially when Netflix for example spent more than £6bn on content last year, more than twice the PSBs combined budget for UK programmes.

　Ofcom has suggested that PSBs can collaborate to compete: work together to give greater scale – partnering each other and commercial competitors to strike mutually beneficial alliances and finding common ground to navigate the changing landscape. The idea of suggesting collaboration might seem odd, given Ofcom’s role in ‘policing’ the market between PSB’s and between PSB’s and others, putting conditions in place to limit certain things, encourage others, and insist the BBC consider the market impact of its products and services. But the 2003 Communications Act made clear that PSB’s were in a ‘compact’, and that their contribution to delivering public service outcomes should be ‘taken together’.

　We’ve recently seen this idea of collaboration take root – the BBC, ITV and Channel 4 have announced they will work together to invest in making free-to-air TV easy to watch on-the-go and on catch-up.

　Ofcom is uniquely placed to have a bird’s eye view of developments across the whole sector, and our commitment to evidence-based practice, extensive research and tracking over time means we can bring facts and factually based insights to the story. We monitor the sector and take evidence from a range of industry, academic and civic stakeholders. Our commitment to transparency can shine light on the often-contested issues.

Areas we are keen to see PSBs continue to deliver.

　The first is to build on their important role to deliver trusted news. For regulators, the changing consumption patterns of news demands a deep understanding of what people see and hear. We monitor these changes through in-depth national research and have witnessed fascinating shifts in their news sources, consumption and attitudes.

　We see that people are consuming news more and more through online or on-demand. It is ever-more personalised and specialised; much comes through social media, without a ‘news brand’ attached – and it’s not surprising to see that these changing consumption patterns are most stark among younger generations:

• a fifth of 16-24s use only the internet for news, compared to just 2% of those aged 55 and above.
• Nearly 9 in 10 people aged 55 and over get some news from TV, but only half of 16-24s do.
• Facebook is the most important source of news for nearly one in five younger people, compared to just 1% of those aged 55 and over.

　Public service broadcasters and major UK broadcasters remain a trusted source for news in the digital age, and amid all the noise of fake news, UK audiences still turn to broadcast to make sense of events – nine in ten said it’s important that they can trust PSB news. The BBC is especially important for this and for many viewers and listeners news is central to how they see it. Past research found that most people turn to the television first for the important things they value in news, such as it being balanced, unbiased, breaking, providing key facts, and providing an expert opinion.

　PSBs and major UK broadcasters have a crucial opportunity to distinguish themselves from global streaming and on-demand services and the sea of information available online: by continuing to provide fair, accurate, relevant and insightful news which matters to the places and communities it is broadcast to. There is a high awareness among audiences that broadcast news is effectively regulated and held to a high standard. Maintaining this is important to keep news as a pillar of strength for the PSBs and others in the longer term.

　The second is investing in new ways to appeal to and connect with young people. Children watch a third less TV than they did at the start of the decade. 90% of young British teenagers are consuming content on YouTube and more recognise the name than they do the BBC. PSBs need to invest in innovative content and fresh ways to reach younger audiences, to ensure their long-term sustainability. We will continue to closely monitor the consumption habits of young people to help broadcasters understand where and how they can be reached.

　The third is to continue to make high quality distinctive programmes that appeal to audiences across the whole of the UK. One clear message from our research is that viewers and listeners feel that programmes made for UK audiences are very important to them, and that PSB’s should show the different kinds of cultures present within the UK. This is a significant way in which UK broadcasters can appeal to audiences. With a few high-profile exceptions, global players are not putting money into UK stories – this work still falls to PSBs. PSB’s still account for most of investment in UK-made shows. This is hugely important to the creative economy.

　With their heritage, remit, regional bases and experience in genres like news and arts, PSBs – with the BBC at the heart – are perfectly placed to continue to create the UK content that British viewers demand – Ofcom can help them work together to tackle some of these challenges.